Outlook favourable for Omani banks in 2025: Fitch

MUSCAT, APRIL 12

International ratings agency Fitch Ratings says it expects Omani banks to benefit from supportive business conditions in 2025, bolstered by strong economic growth and relatively high oil prices.

The upbeat outlook for commercial banks in the Sultanate of Oman is set out in a newly published report, titled ‘Omani Banks’ Credit Metrics Stable as Operating Environment Improves’.

According to the report, Oman’s ongoing economic diversification is enhancing the country’s growth prospects and creating new opportunities for the banking sector.

Real GDP growth is forecast to pick up pace, driven by both hydrocarbon and non-oil sectors. This momentum, along with the recent upgrade in Oman’s sovereign outlook, supports the Positive Outlooks maintained on all rated Omani banks, said Fitch. The agency also highlighted that improving operating conditions could boost some banks’ core credit profiles.

Notably, the report indicates a continued recovery in asset quality next year, aided by loan write-offs and a stable macroeconomic environment. Stage 2 loans are expected to decline further, with limited risk of significant deterioration into Stage 3, even amid ongoing challenges in sectors like real estate, construction, and hospitality, it said.

“We expect lower interest rates will have a limited impact on banks’ net interest margins, and that loan impairment charges will remain moderate, along with reasonable cost discipline. Most banks’ capital buffers are supported by sound internal capital generation. Funding and liquidity conditions are stable. We expect oil prices to continue support growth in customer deposits, which accounted for 90% of total sector non-equity funding,” Fitch further added.

Last December, Fitch Ratings revised its outlook on five Omani banks – Bank Muscat, National Bank of Oman (NBO), Bank Dhofar, Sohar International Bank, and Ahlibank – to positive, while also affirming their Long-Term Issuer Default Ratings (IDR).

The revision, coming on the heels of similar ratings action by Fitch on Oman’s sovereign rating, reflected the agency’s view of “Oman’s improving operating environment that is expected to benefit the banks’ intrinsic credit profiles as well as the authorities' improving ability to support Omani banks.”